bne IntelliNews – After Nasdaq stock suspension, Yandex may default on $1.25 billion convertible notes

Yandex, arguably Russia’s most successful and iconic digital company of the past 25 years, could default in days. The company has warned of this risk even though none of its entities, main shareholders, directors or managers have been targeted by Western sanctions, reports East-West Digital News (EWDN).

The threat stems from the fact that last Monday the Nasdaq halted trading in the shares of many Russian-based companies, including Yandex, which had been listed there since May 2011.

The company explains: “Under the terms of our 0.75% convertible bonds due 2025, in the event of a suspension of trading in our Class A shares on the Nasdaq for more than five trading days, the holders of these bonds would have the right to require us to redeem their notes at par plus accrued interest. The current principal amount outstanding is $1.25 billion. In the event that this redemption right is triggered, (…) the Yandex Group as a whole does not currently have sufficient resources to fully redeem the Notes.

Yandex “would not have sufficient resources to redeem the majority of the notes” if it was prevented from transferring funds from its Russian subsidiaries to its Dutch parent company. This company, along with all of its foreign subsidiaries, currently holds only about $370 million in cash.

Unless it could obtain “additional financing”, the company’s “financial condition and short-term liquidity” would be at risk even if Yandex could meet its repayment obligations under the notes in full.

The company sees another threat in the event that the economic slowdown in Russia continues following sanctions, a depreciation of the ruble or “negative consumer sentiment”: all of these factors could have a “significant adverse effect on his results.

Operations also threatened

Yandex’s impending nightmare would not end there. Although it said it was operating as usual at this time, the company warned that its operations could be significantly impacted “over time” in the event of an “extended suspension of supplies of hardware, software or hardware.” ‘other technologies used in our business or offerings’. if Yandex is unable to obtain “alternative sources”.

Yandex referred to “a number of companies based in the US, UK, EU and elsewhere [that] said they are currently suspending deliveries and services to customers in Russia.

Yandex is also facing a “potential reduction in the number and selection of products we are able to offer through Yandex.Market,” its home market, as many vendors have announced they will stop selling goods from consumption to Russia while several logistics providers have already stopped shipments to Russia.

Meanwhile, the company estimates that “the current capacity of its data center and other technologies critical to operations will allow us to continue operating as normal for at least the next 12 to 18 months.”

Legal exposure

Acknowledging “press speculation about the Russian government possibly taking steps to effect changes in control of companies or assets in Russia in response to sanctions”, Yandex warns that any such action – even if he is “not aware of any plan in this regard” – would have a “material adverse impact” on the value of the company.

This is because although the parent company of the group is registered in the Netherlands, most of its operations and assets are located in Russia.

Risks related to “the current geopolitical situation” were mentioned in Yandex’s latest annual report to the SEC (filed April 1, 2021). “The adoption and maintenance of international law […] sanctions against Russia […] could have a significant negative effect on the company – as well as a drop in the ruble, an interruption in the supply of products and services, as well as “any regulatory limitations on the Internet in Russia”, the company warned at the era.

This article first appeared in East-West Digital News (EWDN), a partner publication of bne IntelliNews.

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